Magic Quadrant for transport management systems – the European context
It has been several months since the research firm Gartner published its annual Magic Quadrant for Transportation Management Systems report which evaluates transport management system providers. The insights included in the 2022 study still seem relevant. What is the current situation in the European market?
Magic Quadrant, or the TMS knowledge base
The renowned research company Gartner publishes annual reports on information technology and related markets. One section of the Magic Quadrant is dedicated to transport management systems – TMS. The report evaluates the market players, dividing them into 4 categories: Leaders, Challengers, Visionaries and Niche Players.
The analysts also examine the market as a whole. The report offers insights for specific regions, including Europe. While the European TMS market is growing as expected, it did encounter several major challenges last year.
Last year’s challenges still relevant
In 2022, the whole sector faced several major challenges that determined its development:
- The Russian invasion of Ukraine – the war affected the logistics industry in Europe in multiple ways. There was an increase in the price of goods, including fuel, which led to increased freight costs. A shortage of drivers emerged, mostly in Central Europe. Due to the hostilities and sanctions imposed on Russia and Belarus, companies were forced to look for new suppliers and transport routes. At the same time, all these problems have become the driving force behind TMS technology.
- Inflation – a challenge that still remains relevant. Rising costs have forced market players to optimise logistics processes and, consequently, implement new TMS technologies. Some organisations have decided to change their existing technology providers.
- Sustainability – last year saw an increased focus on this aspect of the logistics industry. Companies operating in this market must embrace the principles of sustainability and environmental performance, as this is what their customers expect. Meanwhile, the TMS industry, or software providers, are modifying their portfolio to meet these expectations.
- E-commerce – the e-commerce market in Europe is growing at a high rate. Companies in the TMS sector are adjusting their software to ensure maximum shipping automation and large volume management. Customers are also expecting diversification of transport modes and outsourcing.
TMS software spending: Europe lags slightly behind
In terms of TMS software spending, Europe is still the second most valuable market in the world, right behind North America. What can be observed, however, is a slower rate of spending growth. While Europe accounted for 26.5% of TMS spending in 2021, this dropped to 23.7% in 2022. North America and the Asia-Pacific region are growing faster in this respect.
5-year forecast for the European TMS market
Gartner’s analysts recall an earlier 5-year forecast for the TMS software market, expecting the industry to grow from USD 1.4 billion in 2021 to USD 2.2 billion by 2026. This represents an average annual growth rate of 9.3%.
Forecasts for Europe are not as optimistic. Currently, the TMS software market is worth USD 392 million, and is set to reach USD 485 million by 2026. The average annual growth rate is expected to be 5.3%.
The authors of the report point to the difference between Western and Eastern Europe. In the West, the TMS software market is mature and saturated, while in Eastern Europe it has been experiencing rapid growth.
It is reasonable to conclude that in the near future, customers in Central and Eastern Europe, regardless of the slower growth of the TMS market across the continent, will be looking for software to optimise supply chains and reduce their costs. Given the challenges ahead, this would be in their best interest.